Twelve months ago, early to mid-stage companies could operate fluidly. Tracking financial
records and supplementing payroll tasks to administrators within the office. Now, VCs are not
the only investors in the market. Large corporations, hedge funds, and private-equity firms are
joining the industry in search of building superior financial returns from the growth of startups.
Startups are hotter than ever, and this pushes their organizational capacities to new levels.
Record investments and competition are swelling balance sheets, requiring larger funding
rounds and higher valuations, and more keen financial advice on future plans. Such as deciding
to take a company public due SPAC interest.
Startups are aware of this. There were over 162 CFO appointments within the past 12 months.
Since May 14th, a 95% bolster of demand within the sphere (S&P Global Market Intelligence,
2020). However, their position comes with its own financial liability. CFO positions start
at $225,000 per year and require complex salary/stock options–a risk that requires analysis.
Furthermore, some startups don’t need such long-term commitments. With so many options
for capital growth, as well as maintenance of company cash flow and records, the gap must be
filled. Although there is another solution, Fractional CFO services.
Fractional, temporary, or partial CFOs are experienced in providing financial services for
organizations in a part-time, retainer or contract arrangement. In the case of Venture First, this
entity consists of a team of experienced financial professionals working with your company in
oversight of duties that are typically on a project basis and specifically tuned to the company’s
particular challenges or goals. The most common services provided are cash flow issues, low
gross margins, high expenses, outgrown existing systems, needs for cost cuts and navigating an
audit (Skabelund, 2018). Using such information, these institutions can then advise on the
company’s financial future. Companies such as Venture First are then able to advise on higher
tiered decisions such as entering SPAC deals or developing intercompany relationships due to
the network that fractional CFO companies already work with.
Fractional CFOs vs CFOs
CFOs can perform these tasks, but it is necessary to understand the other tools within the role
for the CFO to be successful.
This includes a finance team of accountants filing consistent reports to keep projections in line
with actuals for accurate decisions on futures, consistent meetings, more required office space,
and another high standing employee that expects to weigh in on organizational decisions. The
greatest impact is how much leverage they can take through their position within the company-
-they are the third highest position in office, which comes with the responsibility of more key
decisions organizationally, as well as communicating those commitments to shareholders and
your board of directors. They can also take more public-facing action, such as preparing the
company’s finances for a transaction or developing relationships with investment bankers and
Some Cost Analysis
The best way to tangibly relate this to cost would be to relate this to some theoretical
To keep things simple, imagine that an early-stage company raised around 10 million dollars.
The company is growing very quickly, and it is imperative to maintain financial records and
more accurate data on cash flow in preparation for developing a new product line. The
company would also need some advice on whether it is the right time to start a new line as
Hire a CFO…
The new hire is now getting about $200,000-$250,000 per year as a base salary (Lieberman,
2021). Add in bonuses, benefits, taxes, overhead and long-term incentives (equity), and that
could add up to $300,000-$400,000 per year or more. The new CFO gets the job done, but is
now a long-term employee, in which the 300,00 dollars is a yearly expense for the early-stage
Now, looking at the temporary CFO side of things…
The company hires a fractional CFO for a financial review, forecasting, and advice on the
implementation on a future product line drop–around a 6-month commitment. Per week, the
cost would be from $2,500 to $5,000, totaling in a range of $120,00 to $240,00 (Robinson,
These are savings of over 60% by outsourcing to a part-time CFO.
Many business owners resist outsourcing important positions, and it makes sense why that
would be the case. Building a company from square one makes you deeply invested in its
success. That can cause skepticism to imagine a contractor could match an internal team
However, the best talent within the finance and accounting services industry is currently within
the part-time space. This includes people who usually are filling strategic roles such as CFOs,
marketing directors and technologists. And since roughly 65% of businesses fail within the first
10 years due to cash flow management, developing a different perspective can be very
important in the sustainability of an early company’s growth.
This can benefit much more than just the company. As a financial advisor, providing another
option such as hiring a fractional CFO allows a company to save more money and provide more
profits. For business owners, they are then able to maintain overall autonomy on financial
projections to appropriately brace for any type of situation that arises. As an investor, such as a
VC firm, this allows them to save for more focus on building superior financial returns for you
and your partners.
Building the Process for Outsourcing
So, what are possible processes for outsourcing?
Perform an internal talent gap analysis. Start with the company’s goals, then determine what
resources you have for meeting those goals and what you lack.
Develop job descriptions and a budget. It is important to be clear about what job needs to be
completed. When outsourcing strategic roles, this may seem paradoxical, given that companies
are seeking professionals for their expertise within the field. Still, they should be able to tell
them what the goals are for the role and what internal resources they can provide, so they can
give you an informed cost estimate.
Process prospective contractors carefully. Just as any hiring manager would for an employee,
screen each candidate for best fit across a variety of measures: culture, skills, experience,
creativity, passion, etc.
Every company has its own specific parameters that it must work through to be successful. An
early-stage company can indeed hire a CFO and benefit from its long-term success. But maybe
all the startup needs a short-term aid on its financial operation to also see success. What is key
is managing and understanding these opportunities to find your best fit.